In explaining why he wanted to fight back against the market dominance of AT&T and Verizon Wireless, Masayoshi Son took it down to a personal level as he ended his speech to the Competitive Carriers Association (CCA) Global Expo 2014, March 25, in San Antonio, Texas.
He said he was born in a poor, rural village in Japan. “It was not easy for me,” Son said. “However, any kid, whether born rich or poor in an urban or rural area, should have equal opportunity to succeed.”
Son questioned whether the United States market is indeed competitive and allows opportunities in rural areas. Instead, he warned the members of CCA, which are mostly rural wireless carriers, that they are threatened by the expansion of what he called the AT&T/Verizon wireless duopoly.
As proof of that duopoly Son said that AT&T’s and Verizon’s combined subscribership share of the market has grown from 56 percent in 2008 to 73 percent in 2013. Additionally, the two carriers’ share of the enterprise market grew from 51 percent in 2008 to 80 percent in 2013. The AT&T/Verizon Wireless share of the industry’s total profit also grew from 67 percent to 84 percent in the last five years.
The wireless duopoly limits rural carriers’ ability to build out LTE high-speed networks, according to Son, as well as their access to LTE devices.
“Users require state-of-the-art handsets,” Son said. “Access to LTE handsets makes a huge difference between service offerings of AT&T/Verizon versus that of the rural carriers. AT&T has 48 LTE models and Verizon Wireless has 29 devices, while rural carriers have access to only nine models.”
Son committed Softbank and Sprint to support the rural and regional carriers and their access to LTE devices and LTE investment. He said the carrier can provide that support because its service area is complementary and not competitive to that of rural carriers.
“In the case of Sprint and T-Mobile, we are focused on the urban areas, while you are in the rural areas. It is a structural partnership. Together we can compete with the duopoly,” he said.
Clearinghouse Key to Roaming Agreements
CCA has developed a central data hub as a clearinghouse for its members to complete simple, commercially sustainable, individually negotiated, reciprocal roaming agreements with Sprint.
“In the past, to combine those systems we used to have to work one by one using a bilateral data services hub,” Son said. “With this new technology and platform being prepared, multi-lateral cooperation with a data hub as a structure, we can systematically partner with each other.”
Sprint has formed a shared-network alliance with the NetAmerica Alliance, whose members are rural carriers that want to provide LTE service. In the shared network agreement, Sprint will provide wireless service providers with access to 54 megahertz of 800 MHz and 1900 MHz spectrum, access to Sprint’s network and access to the Sprint’s wireless devices. This is the trifecta that solves rural carriers’ data roaming issues, which have blocked them from playing in the 4G wireless space.
The NetAmerica Alliance will provide members with assistance in planning, building and operating their LTE networks in partnership with Sprint. The local network will be built to Sprint Network Vision standards and will deliver services to rural consumers out of a shared Sprint and NetAmerica core for a Tier-1 experience. Additionally, Sprint will contribute ongoing cash payments to the carrier to help cover a percentage of the network build costs.
In return, Sprint customers will have access to NetAmerica Alliance members’ LTE networks, which is expected to improve Sprint’s nationwide coverage.
“We would like to assist the rural carriers with building out LTE systems,” Son said. “You have the spectrum and are building out the network, but without the latest LTE handsets, it is no good. We offer you full support in getting those devices. We would like to help you fight the duopoly with our technology and our spectrum, as well as financially. We need a new technology to fight back.”
Panelists described small cells as being at the base of the growth hockey stick, during Small Cells, Big Deal at the AGL Conference, March 20, held at the Gaylord Opryland Resort in Nashville. Panelists from three major carriers — AT&T, Verizon Wireless and Sprint — and an equipment manufacturer, SpiderCloud, discussed how the deployment of metrocells, microcells, picocells will provide ample opportunities for the industry as a majority of that work will be outsourced.
“AT&T is working with partners to design and deploy small cells,” Melissa Ashurst, area business development manager, AT&T Antenna Services Group, said. “It is not something just anyone can do.”
Sprint will leverage the implementation expertise in the wireless industry, as well, according Seth Jones, Sprint senior manager, network engineering. “In a world where the rounding error for small cell deployment being in the tens of thousands, there is no way we can do it alone,” he said. “There will be a lot of outsourced activity in this space.
Jones added that tower companies already have the expertise to have a play in outdoor small cell deployment. “Outdoor small cells look very similar to a cellular panel antenna on the side of a building,” he said. “They require an understanding of mounting, climber safety, getting power to the antenna and how to backhaul the signal.”
While a small cell can be described as “anything and everything that is smaller than a macro-site,” further definition is needed as well as a greater understanding of the deployment complexities, panelists said.
“The challenge is defining exactly what is a small cell and how do you put it into a box so everybody understands it,” Jones said. “It is not quite baked yet. We are looking for further guidance from PCIA concerning the definition. It has an impact on zoning laws and how regulators look at what you are trying to deploy.”
Panelists discussed how small cells are integral to carriers’ strategies as they constantly work to avoid exhausting their spectrum.
“We have to innovate very aggressively to make sure we have the tools to keep up the capacity offload systems, which demand multi-band, multi-protocol small cells,” Jones said.
Small cells have evolved from consumer to IT-grade enterprise technology, similar to the evolution of Wi-Fi 15 years ago, according to Russell Agle, director of business development, SpiderCloud.
“Femtocells are akin to the consumer Wi-Fi market, good for residential use, but when you get to the dense, indoor deployments, particularly for enterprises, a separate [small cell] architecture is needed,” Agle said.
Jones said that increasing spectral efficiency through macrocell splitting is simply not enough to keep up with the pace of today’s data traffic.
“As carriers begin to talk almost casually about terabytes and petabytes of information, we cannot rely only on macrocells to provide all of our users with a great level of service,” Jones said. “We have to find another ways. We have to keep distributing the network and get smaller and smaller and smaller [coverage footprints per site].”
AT&T and Verizon Wireless will drive a robust market this year for wireless infrastructure, according to the Wireless Retail and Network Update by RBC Capital Markets, while T-Mobile and Sprint will surge next year. The firm projects site additions and new lease equivalents will rise as high as 25,000, compared to just under 23,000 in 2013.
“For the wireless sector, 2014 demand drivers will likely feature an increased mix shift toward new leases, driven by capacity/infill requirements at AT&T and Verizon,” wrote Jonathan Atkin, RBC analyst.
The drivers of leasing and amendment demand this year, according to RBC Capital Markets, reflect continued LTE overlay work, including Verizon’s deployment of LTE in the Advanced Wireless Service (AWS) band, and a robust pace of new site additions.
Last year AT&T and Verizon added 2,000 and 2,600 sites, respectively. Around half of those adds came in the fourth quarter, according to RBC stats.
“We believe each carrier plans to continue that late-year run rate through 2014,” Atkin wrote. “As it pertains to AWS [band] activity at Verizon, we believe the carrier will add 12,000-13,000 sites in 2014, with a similar pace plausible in 2015 as the company completes its coverage at that frequency.”
In the second-half 2014 and 2015, Atkins expects Sprint will accelerate its 2.5 GHz LTE deployments, which may have been delayed due to equipment shortages. T-Mobile will increase to its LTE coverage footprint at 1900 MHz to reach 250 million in population and deploy of LTE at 700 MHz covering 158 million in population. RBC estimates 7,000-8,000 sites will be slated for LTE deployment at both 700 MHz and 1900 MHz.
“We believe Sprint continues to be challenged in its network improvement initiatives, due to equipment availability constraints for its 2.5 GHz LTE deployment, using 8T8R [eight transmitter/eight receiver] technology, and it is facing greater competitive challenges at retail than anticipated earlier in the year from T-Mobile and AT&T, with its tablet-centric postpaid growth a pressure on ARPU,” Atkin wrote.
Sprint plans to deploy Sprint Spark, which uses 8T8R carrier aggregation technology, in 100 largest metro areas in the next three years, with initial availability in five markets beginning last fall. A company press release stated that Sprint 4G LTE service will be available by mid-2014 to approximately 250 million Americans, and Sprint expects 100 million Americans will have Sprint Spark or 2.5 GHz coverage by the end of 2014.
Sprint is still behind Verizon’s LTE speeds and has not made much progress in its network upgrade initiatives recently, according to RBC’s analysis.
“We believe activity levels will ramp further in 2015 at Sprint and T-Mobile as we believe the 8T8R 2.5 GHz deployments (Sprint) and 700 MHz and 1900 MHz LTE overlays and coverage expansion (T-Mobile) will gain momentum,” Atkin wrote.
Due to their small size and deployments in enterprises, small cells remain a quiet revolution. You just don’t hear that much about them, unless you read the Wintergreen Research study that forecasts small cell and femtocell market shipment growth of up to $5.98 billion by 2019.
For example, Verizon Wireless, since announcing in May of last year that it would deploy small cells, has been mum on the subject. That is, until now. Last week, Verizon and Alcatel-Lucent announced the deployment of the vendor’s small cell solutions in indoor and outdoor locations, such as popular outdoor venues and dense metropolitan areas.
“For Verizon, small cells are part of a balanced approach to deliver network coverage and capacity so that our customers receive the rich user experience they have come to expect from us,” Mike Haberman, vice president, network technology for Verizon Wireless, said. “Alcatel-Lucent’s small cells enable us to strategically add coverage and capacity to high-traffic and hard-to-reach areas, both indoors and outdoors.”
Alcatel-Lucent is supplying Verizon Wireless with the lightRadio 9764 Metro Cell Outdoor and the 9768 Metro Radio Outdoor products as well as its 5620 Service Aware Manager, which provides end-to-end network and service management across all domains.
Verizon Wireless’ deployment of Alcatel-Lucent’s small cell solution is a primary example of an industry transformation in network architecture that will include large-scale integration of small cells as part of a heterogeneous network according to Steve Marino, vice president of Alcatel-Lucent’s Verizon Customer Team.
“This deployment represents not only a vote of confidence in the technology of small cells to deliver improved capacity and coverage, but also the ability of operators to overcome deployment challenges such as site selection, backhaul and installation,” he said
In the last quarter, Verizon Wireless announced that its LTE coverage build out was completed and its service now available to more than 303 million people in more than 500 markets, but it continues to improve upon the network and push LTE into the AWS Band, according to Fran Shammo, Verizon Wireless CFO.
“Throughout the rest of this year, we will continue to add capacity and optimize our 4G LTE network, ensuring that customers are receiving the quality and consistent reliability that they expect from our network and devices,” he said. Since June, the main emphasis at Verizon Wireless has been increasing capacity and densification.
This month, Verizon Wireless began deploying LTE in the Advanced Wireless Services band (1710 MHz to 1755 MHz for uplink, 2110 MHz to 2155 MHz downlink) to deal with capacity issues in major cities.
“Given the growth of this we have had some densification issues in major cities like New York, Chicago, San Francisco, what you see us doing is being very proactive in more in-building coverage, more densification cell sites,” Shammo said.
Wireless capital spending in the third quarter totaled $2.5 billion. Year-to-date, wireless capex was $6.7 billion, nearly 11 percent higher than last year.
“We are very focused on improving investment returns and capital efficiency and expect that our annual capex to revenue ratio will improve, even with the planned additional spending in 4G LTE,” Shammo said. “We are utilizing our AWS spectrum to further optimize the network and we are already spending some of the incremental capital we allocated to wireless capacity.